Zambia new tax evasion laws
By Nawa Mutumweno – Government has drafted a new law that will curb foreign currency revenue losses in the wake of tax avoidance and tax evasion reports in local and international media.
This is according to a radical bill seeking to amend the Bank of Zambia (BoZ) Act in 2013. Once enacted, it will help the Government capture billions of dollars annually in taxes and fees that have in the recent past been lost.
In 2012, a report revealed that Zambia was losing up to $1.5 billion per year from unscrupulous business houses in tax avoidance and evasion.
The introduction of the Bill which is expected to receive resistance from multi-national companies and their lobbyists, comes a year after President Michael Sata instructed Government to ensure that all mineral exports are receipted through the central bank.
This is with a view to establish how much the companies really earn from mineral exports to enable Government know how much to hold back and how much the companies can claim as their own.
Once enacted into law, Government, through BoZ will have powers to ‘monitor’ and even ‘regulate’ foreign transactions which have gone unregulated since Zambia returned to multi-party politics in 1991 and liberalised the economy.
The highlights of the Bill and what it will be able to do as it empowers BoZ to monitor are given below:-
- Foreign exchange inflows and outflows which means the bank will now play a more hands-on role in checking how much money foreign companies are transmitting abroad to their parent companies and also how much money foreign companies and individuals are bringing into Zambia and for what purpose
- Imports and exports of goods and other ‘inflows’ and ‘outflows’ that have previously gone unchecked
- International transactions in services plus international transactions for foreigners that previously received little or no attention
- Profits or dividends received in respect of investment abroad, which is likely to curb the rampant foreign currency flight Zambia has experienced as a result of foreign companies – especially mines – reporting profits abroad and losses locally
- Borrowing and trade credits from foreigners or non-residents doing business in Zambia or receiving and transferring money out of Zambia
- Investment in terms of equity and debt securities abroad
- International money transfers that come ‘’in’’ and ‘’out’’ of Zambia, including receipts of both interests and principal on loans to foreigners
In the recent past, foreign firms, especially multinational mining companies, have been named in siphoning billions of dollars from the country’s economy through tax avoidance and, in some cases, tax evasion.
Not too long ago, the deputy minister of Finance Miles Sampa told the Zambia Daily Mail that Zambia is losing as much as $1.5 billion per year to tax avoidance, with mining firms being the biggest culprits.
‘’Only one or two mining operations are actually declaring positive earnings. The other mines for one reason or another, some genuine, some not, are always making losses. Most of it is due to transfer pricing or tax avoidance.
‘’We are looking at developing a law that will criminalise false reporting. These loopholes cost Zambia at least $1.5 billion a year. How many hospitals can that build… How many roads can that help us to develop?’’ he queried.
